HomeworkLib
Question

If the equilibrium price in the bond market for a 1 year discount bond is 9400,...

If the equilibrium price in the bond market for a 1 year discount bond is 9400, then the equilibrium interest rate in the loanable funds market must be

a 9.4%

b.4%

c 6%

d. 6.4%

I need help with finding the percentage on this problem. Please explain. Thank you

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Equilibrium price in the bond market for 1 year discount bond= 9400.

Assume,Face value = 10,000

Interest rate = (10,000 - 9400 / 9400)100 = 6.4 %.

Hence, option (D) is correct.

0 0
Add a comment
Know the answer?
Add Answer to:
If the equilibrium price in the bond market for a 1 year discount bond is 9400,...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Q.1 (15 points) Assume that the equilibrium in the loanable funds market is at an interest...

    Q.1 (15 points) Assume that the equilibrium in the loanable funds market is at an interest rate of 5% and the total quantity of loans is $650 billion. In addition, in this initial situation, the government is borrowing $80 billion per year to fund the budget deficit. (a) How much is the private investment in this initial equilibrium? (b) Now the government increases spending by $320 billion per year and finances this spending completely with additional borrowing. (i) Draw a...

  • In a closed economy, how would each of the following events affect bond price and market...

    In a closed economy, how would each of the following events affect bond price and market interest rate? Use the figures of both bond market and market of loanable funds to illustrate the changes to the interest rates. The expected rate of inflation decreases. The federal government runs a budget deficit.

  • A 13-year, 6 percent coupon bond pays interest semiannually. The bond has a face value of...

    A 13-year, 6 percent coupon bond pays interest semiannually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent? A) 1.97 percent increaseB) 1.79 percent increaseC) 1.79 percent decreaseD) 1.6 percent decreaseE) 1 percent decrease I need to solve it with this calcualter , please, ( Texas Instruments - BA II Plus) step by...

  • If the bond duration is 2.5 and the market rate of interest (the discount rate) rises...

    If the bond duration is 2.5 and the market rate of interest (the discount rate) rises by 1 percentage point, what would be the percentage change in price?

  • 10. Using the accompanying diagram, explain what will happen to the market for loanable funds when...

    10. Using the accompanying diagram, explain what will happen to the market for loanable funds when there is a fall of 2 percentage points in the expected future inflation rate. How will the change in the expected future inflation rate affect the equilibrium quantity of loanable funds? Interest rate 1 - 8% E1 F.... Q1 Quantity of loanable funds 11. Then

  • 10. The current market price of a one year discount bond with a face value of...

    10. The current market price of a one year discount bond with a face value of $100 is $89.28. Also, the current market price of a two year 25% coupon bond with a face value of $2000 is $2101.44. (12 points) a) Draw the timeline associated with each bond. b) Determine the spot rates between year 0 and year 1 (-1) and between year 1 and year 2 (12) c) Use r2 from part b) to determine the price of...

  • How can I calculate interest payment and issue price in Excel? Bond Discount Problem:On January 1,...

    How can I calculate interest payment and issue price in Excel? Bond Discount Problem:On January 1, 2017, Waterfall Lodge & Amusement Park issued $6,000,000 of 6% bonds, due in 10 years. The market interest rate for bonds of similar risk and maturity is 7%. Interest is paid semiannually on June 30 and December 31 each year. W18     Face amount $          6,000,000.00     Interest payment 　     Market interest rate per period 3.5%     Number of periods                               20     Issue price 　

  • 1:47 PM cdn.fbsbx.com l MetroPCS SHARE Refer to the graph to answer the toowing questions $200...

    1:47 PM cdn.fbsbx.com l MetroPCS SHARE Refer to the graph to answer the toowing questions $200 $250 $300savid In the figure, line 2 represents theand at an interest rate of 6 percent a of loanable funds exists. quantty supplied of loanable funds; surplus demand of loanable funds; surplus demand for loanable funds; shortage O supply of loanable funds, shortage quantity demanded of loanable funds surplus Question 45 2 pts Refer to he graph to answer the toowing questions Assuming the...

  • The demand and supply for a one year discount bond with a face value of $1000...

    The demand and supply for a one year discount bond with a face value of $1000 is given by Bd: P = -0.5Qd + 1250 and Bs: P = Qs - 250. What is the equilibrium price and quantity for this discount bond? What is the interest rate?

  • 9. Equilibrium in the bond market The following graph shows a bond market in equilibrium at...

    9. Equilibrium in the bond market The following graph shows a bond market in equilibrium at a bond price of $5. Use the following graph input tool to answer the questions that follow. (Note: You will not be graded on any adjustments you make to the graph.) Suppose the bond price has changed to $2, creating a ____________( surplus / shortage ) of ______________ million bonds. (Hint: Enter the new price in the “Current Price” field to see the changes...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT